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Smith+Nephew shares jump on strong H1 results and reaffirmed guidance

Investing.com
·2 min read

Investing.com -- Smith+Nephew PLC's (LON:SN) shares jumped on Thursday following the company’s first-half results and its reaffirmed fiscal year 2024 guidance.

At 4:33 am (0833 GMT), Smith+Nephew was trading 7.3% higher at GBP 1,204.

“The strong H1 margin performance and guidance reiteration materially de-risks consensus FY2024 estimates, in our view,“ said analysts at RBC Capital Markets in a note.

Smith+Nephew's Q1 revenue of $1,441 million met consensus expectations and was primarily driven by robust performance in Sports Medicine&ENT, although Wound Care fell slightly short of expectations, RBC added.

The company’s H1 trading margin of 16.7% exceeded the consensus estimate of 16.3% by approximately 40 basis points. Additionally, H1 earnings per share (EPS) reached 37.6 cents, surpassing the consensus of 37 cents by 1.6%.

Operating profit surged 19.5% to $328 million in H1 2024, reflecting improved operating leverage and benefits from the 12-Point Plan. Trading profit margin expanded to 16.7%, exceeding the company’s guided range.

Cash conversion also saw improvement, rising to 60% from 26% in H1 2023, with further positive inventory unwind expected in the second half of the year (H2).

In the Orthopaedics division, US Hips and Knees faced ongoing challenges, leading to continued share losses in Q2. However, the company is optimistic about a rebound in H2, supported by enhanced implant and instrument availability, improved customer satisfaction, and stabilized staff turnover.

Outside the US, the company saw continued strength in Hips&Knees and Trauma&Extremities, along with strong performance in Sports Medicine&ENT.

Although Wound Care growth was slower than anticipated, largely due to the Grafix skin substitute product's performance before the Grafix Plus launch, growth remained strong in Santyl and Advanced Wound Devices.

Smith+Nephew has reaffirmed its fiscal guidance, projecting 5-6% underlying revenue growth, with a foreign exchange headwind of about 60 basis points, and a trading margin of at least 18.0%.

The company's medium-term targets remain unchanged, aiming for over 5% underlying growth and a trading margin of at least 20% by 2025. The consensus for FY2024 expects 5.3% underlying revenue growth and an 18.2% trading margin.

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